NRG convoluted Improvement

NRG Energy (NYSE:NRG) released results contained in a very complicated press release. The headline and lead in spin how NRG is doing better revenue wise, income wise and how they are improving their hedge position. While they are reporting much improved cash flow from operations management has chosen to first to discuss their hedging program.

NRG today announces a coordinated series of initiatives designed to both extend and strengthen our baseload hedging position and to enable further optimization of the Company's ongoing capital allocation program.

It appears that NRG is overly fixated with financial instruments and not focused on sustainable operations, which create long term shareholder value. Given the huge improvement in net operating income they should have been explaining the win and why it has happened in this quarter. Much of the improved results are attributable to acquisitions. The question becomes will the new assets continue to improve profitability. Which may be the reason the management does not want to talk very much.

Management reports the hedge reset was so large that guidance has been increased to “2007 cash flow from operations and adjusted EBITDA guidance has been raised to $1.5 billion and $2.1 billion, respectively, from previous 2007 guidance provided in January 2006.” They are amending their credit agreement to allow for the hedge reset while at the same time announcing plans to increase debt reduction by another $250 million.

Hard to follow. Hard to write. Hard to read the press release. If you want to trade energy there are other vehicles which are more straight forward and cleaner to assess.